Actuaries have backed the governments decision to delay implementation of the charge cap for defined contribution pensions and called for more focus on the quality of schemes
Last week, pensions minister Steve Webb confirmed that the charge cap for DC schemes would be delayed until at least April 2015. He said the timing of changes and the potential effect on auto-enrolment 'didn't quite stack up'.
Many in the pensions industry welcomed the moving, saying the government's initial timescale was far too restrictive.
The Institute and Faculty of Actuaries agreed that delaying the implementation of the charge cap made sense.
Jim Boyle, chair of the pensions board at the IFoA, said: 'There is a lot of change underway in pensions at the moment; people need time to understand these changes and employers need time to understand both the changes and their implications.'
He added that employers providing pension provision through auto-enrolment over the next two years would need time to review the options available.
In October, the Department for Work and Pensions proposed three possible capping regimes: 1% of funds under management; a lower charge cap of 0.75% of funds under management; and a two-tier 'comply or explain' cap.
But Boyle said: 'Low charges do not necessarily equate to good outcomes or indeed good value, and we believe the structure of a pension scheme is an important factor that should also be considered. We want to see a focus on good outcomes for scheme members beyond retirement, rather than just one small piece of the puzzle.'
Webb's decision was criticised by Gregg McClymont, his Labour opposite number, who claimed it would leave pension savers worse off.
'Capping pension charges would help families in Britain who are facing a cost-of-living crisis,' he said.
'The government's decision to delay the introduction of a cap on pension charges is another example of its failure to stand up for interests of savers.'
But Paul Jayson, a partner at actuarial firm Barnett Waddingham, told The Actuary that, while looking at charges was important, it was better to get the structure of a pension scheme right first.
He said the delay wasn't as big an issue as Labour had made it out to be.
'Investment management performance is more important than charges and you have to pay a bit more to get better quality,' said Jayson.
'What I wouldn't want to do is stifle innovation in the market by having charging handcuffs on too early.'
He said that a cap should be introduced at around the 18-24-month mark to allow schemes to develop and reach a quality standard.
'But while the market is young and funds are small, charges make less difference.'
